Information on the involvement of South Africa’s government in crop insurance could be available during the national budget, while insurance for emerging farmers will also be on the agenda.

“The government and private insurers are investigating various policy solutions for the development of a crop insurance scheme, which could ease the pressure on farmers,” said Dr Reshma Sheoraj, Director of Insurance at the National Treasury.

“One of the suggestions is to reduce the cost of insurance premiums of crop insurance for commercial and small farmers to make it more affordable and accessible,” said Sheoraj.

Sheoraj said policy solutions extend to research, but is still subject to approval. Policy discussions are held in the Treasury and the Department of Agriculture, Forestry and Fisheries.

Smallholder farmers

The suggestions being put forward will also address the needs of emerging farmers.

“Smallholder farmers must be supported to become stable, commercial farmers. Insurance is one of the options, but a number of factors must be in place,” said Sheoraj.

Dino Lazaridis, an insurance economist at the Treasury, said there is a possibility that index-based products, which have already proven to be successful in East Africa, will be used.

These products consist of criteria like rainfall, which mean small farmers in a certain area will get a pay-out if there is a decrease in rainfall.

Lazaridis said there are a few challenges: the criteria will only work in regions where farmers have identical farming practices, production means and harvests. Regions must also be mapped in detail.

Lazarides said in some African countries similar products were used. It started with seed insurance, instead of crop insurance. Later, these products are extended and more products added.

Index-based products have a big cost advantage because assessors don’t have to visit farms.